How to Repair Credit

Keeping your credit healthy is one of those tasks that is always important, but it becomes even more critical when you’re planning on buying a home. Whether you’re a seasoned homeowner or a first-timer, your credit score is a primary factor that mortgage lenders consider when evaluating your application. If you’ve had a run of bad luck financially, you know how hard it is to find a pathway to recovery, and if you’re hoping to buy a home, it may seem like an overwhelming proposition. Here are a list of things you can do to try to turn things around so that dream of a house can turn into a reality. Check out our tips to repair credit below.

1) Try to Make Payments On Time and Keep Your Balances Low.

No single factor affects your credit scores as much as your history of on-time payments, so if you’ve had problems making payments on time in the past, it’s time to turn over a new leaf quickly. Pay your bills and any existing lines of credit on time, every time.. If the problem is forgetfulness or disorganization, automate the payments. When you are rebuilding credit, you cannot afford a mistake like missing a payment. If bills have already gone to collections, though, prioritize the ones where your account is still in relatively good standing. Collectors may make the most noise, but they aren’t your top priority.

2) Try Getting a Small Loan to Build Credit.

A small loan will help in two ways: it can help you pay off existing debts and start building your credit back up as long as you follow the terms for repayment.  You’re most likely to find one at a credit union or community bank. You’ll need to be a member or customer, and you’ll have to show proof of income and ability to repay. Your on-time payments are reported to the credit bureaus, and will help get your credit score up with every on time payment.  It’s also possible to get what’s called a credit builder loan, which is like a reverse loan and is designed to do exactly what it sounds. You won’t get the funds until AFTER you have made all the payments for it, but the on-time pre payments can do wonders to your credit rating.

3) Get a Secured Credit Card.

If your credit card accounts were closed, you may need to start with a secured credit card.  With this card, you deposit money upfront as collateral, but then it works like any other credit card. Make sure the issuer reports payments to all three major credit-reporting bureaus.

4) Ask a Relative to Be an Authorized User.

If you have a close relative or friend who is willing and has good credit if they would be willing to let you be an authorized user on their acCount. A few cards allow primary cardholders to set spending limits, which could make someone feel more comfortable about adding you. Becoming an authorized user won’t have a huge impact on your score because you aren’t legally responsible for debts on that account. Being an authorized user can also hurt your score if the account holder doesn’t pay the bill on time, so make sure you ask someone with good credit habits.

Although it may seem overwhelming attempting to build your credit back, the sooner you start the sooner you will find yourself with a better credit score. We hope our tips on how to repair credit will help you get to the place you want to be on your credit journey!